Shares rise to four-week highs as investors bet on China’s recovery

LONDON (Reuters) – Global stock markets rose to four-week highs and the Chinese yuan headed for its best day against the dollar since December on Monday, as investors saw a resurgence in China to boost global growth, even when the growing cases of coronavirus delayed business. -opens in the United States.

The MSCI All-Country World Index, which tracks stocks in 49 countries, rose 0.7% to its highest level since June 6 at noon in London.

European stocks rose, with the pan-European STOXX 600 index rising 1.4%. Shares exposed to China (automakers, industrials, energy companies and luxury goods manufacturers) rose sharply, while banks also recovered.

In Asia, MSCI’s broader index of Asia-Pacific stocks outside Japan rose 1.8% to its highest level since February, with bullish sentiment spreading to other markets.

E-Mini futures for the S&P 500 gained 1.1%.

Chinese blue chips were up 5.7% on top of a 7% rise last week to their highest level in five years. Even Japan’s Nikkei, which has lagged behind with a weak domestic economy, managed to rise 1.8%.

China’s offshore yuan was on its way to its best day against the dollar since December, nearly 0.7% to 7.0210 per dollar.

Among the reasons investors cited the purchase was the improvement in economic data, UBS noted that the Citi Economic Surprise Index for the US has reached its highest level on record. The index measures how well economic data releases are doing relative to consensus forecasts.

Some cited an editorial in the China Securities Journal, which said Monday that China needed a bull market to help finance its rapidly developing digital economy.

“We advise against considering uncertainty as a reason to exit the markets. Instead, we see ways that investors can cope with uncertainty, including market averages, or even take advantage of volatility, “said Mark Haefele, chief investment officer at UBS Global Wealth Management.

In Hong Kong, Jefferies chief global equity strategist Sean Darby said the positive sentiment towards Asian markets was the result of better-than-expected regional economic data and high levels of liquidity.

“All the indicators of global monetary policy are flashing green right now. It is very weak and that should mean that underperforming markets should perform well, “Darby told Reuters.

“The dollar has also weakened in the past five days, so emerging markets, led by China, typically do well because of that.”

Most markets gained ground last week when a large amount of June economic data beat expectations, although the resurgence of coronavirus cases in the United States is clouding the future.

In the first four days of July alone, 15 states reported record increases in new cases of COVID-19, which has infected nearly 3 million Americans and killed about 130,000, according to a Reuters count.

Analysts estimate that reopens affecting 40% of the US population have now recovered.

“Markets will have to climb a wall of concern in July as economic activity is likely to be softened by the V-shaped recovery seen in recent months,” said Robert Rennie, head of financial market strategy at Westpac. . “We must also remember that relations between the United States and China are deteriorating markedly.”

Two US aircraft carriers conducted exercises in the disputed South China Sea on Saturday, the United States Navy said, as China conducted military exercises that have been criticized by the Pentagon and neighboring states.

The risks, combined with relentless stimulus from central banks, have kept sovereign bonds backed by better economic data. U.S. 10-year yields rose to 0.7% on Monday, well above the June high of 0.959%.

The yield on Italy’s 10-year bonds fell 4 basis points to around 1.29%, pushing toward the more than three-month lows reached last week. That narrowed the gap on the German Bund’s benchmark yields to around 171 basis points.

Citi analysts estimate that global central banks will likely buy $ 6 trillion of financial assets in the next 12 months, more than double the previous peak.

The major currencies have largely been limited to the range with the dollar index falling 0.3% to 96,894, after spending an entire month in a tight band of 95,714 to 97,808.

The dollar held steady against the yen at 107.50 on Monday. The euro rose 0.6% against the dollar, above the $ 1.13 mark.

In the commodity markets, gold has benefited from super low interest rates worldwide as negative real yields on many bonds make non-interest bearing metal more attractive.

Spot gold traded at $ 1,776.21 per ounce, just above last week’s high of $ 1,788.96.

Oil prices mixed with Brent crude oil futures rising 1.2% to $ 43.58 per barrel. US crude remained unchanged at $ 40.65 a barrel amid concerns that the rise in coronavirus cases in the United States would curb demand for fuel.